On August 1, 2006, ABC Company borrowed $400,000 to finance the purchase of a bu

Question

On August 1, 2006, ABC Company borrowed $400,000 to finance the purchase of a building. The terms of the mortgage require payments of $2,100 to be made at the end of every month with the first payment being due on August 31, 2006. The length of the mortgage is thirty years, and the mortgage carries an annual interest rate of 5%. The amount of interest expense that ABC Company would report in its 2006 income statement related to this mortgage would be closest to:

A) $2,184.80

B) $6,655.81

C) $8,246.83

D) $8,315.21

E) $8,938.76

Explanation / Answer

Answer=D) $8,315.21

Principal 400000 Payment 2100 Length of the mortgage 30 Annual Interest Rate 5% compounding 12 Period from august to december 5 Cumulative interest from august to december to be shown in income statement= CUMIPMT(5%/12,30*12,400000,1,5,0) Cumulative interest from august to december to be shown in income statement= $8,313.22

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.